"Payables days 140 120 100 80 60 40 20 0 2009 2010 2011 ARM payables days 125 116 125 BCL payables days 76 103 57 Chart 10Inventory days 120 100 80 60 40 20 0 2009 2010 2011 ARM inventory days 120 107 93 BCL inventory days 83 70 61 Chart 11The inventory days for both ARM and BCL reduced. This indicates better inventory management andfaster turn over which in turn led to reduced finance costs as less working capital is tied on inventory.However, comparing ARM with BCL it is visible that ARM did not do its best over 2009 to 2011 andcould have achieved better results regarding inventory days. Days DaysGearing ratiosGearing ratios 250 200 150 100 50 0 2009 2010 2011 ARM Debt ratio 66 70 70 BCL Debt ratio 35 35 28 ARM Debt:Equity ratio 194 236 236 BCL Debt:Equity ratio 53 54 39 Chart 12ARM had a debt ratio average of 69%which is high when compared to the ratio of BCL which was anaverage of 33% in the years 2009 to 2011. This means that ARM faced a higher financial risk comparedto BCL. The debt to equity ratio shows the fraction of debt in relation to the company’s equity. It is againconclusive that ARM was highly geared with ratios of 194%, 236% and 236% in 2009, 2010 and 2011respectively. This is very dangerous as the company is facing a very high financial risk as well as highcosts of borrowing. When compared to BCL debt to equity ratio it raises alarm as to how high gearedARM was and the high risk it faced over 2009 to 2011.ARM’s interest cover decreased from 13.3 times in 2009 to 5.9 times and 5.3 times in 2010 and 2011respectively. This also points out the increasing financial risks ARM is facing together with high costs ofborrowing. The interest cover for BCL also decreased in the years 2009 to 2011. The ratio was 679.1times in 2009, 82.5 times in 2010 and 22.7 times in 2011. Therefore, it is safe to say that ARM in regard to gearing did not do well but instead deteriorated in theyears 2009 to 2011. This is due to increased borrowings to fund their expansion plans as it is noticeable inthe statement of cashflows.PercentageInvestor ratios80 60 40 ARM EPS change BCL EPS change 20 ARM DPS change BCL DPS change 0 2010 2011 -20 -40 Chart 13ARM’s shareholders enjoyed a growth in EPS in 2010 and 2011. BCL shareholders faced a fall of EPS in2010 and a small increase in 2011. The DPS of ARM also increased in both 2010 and 2011 while BCL’sDPS fell in 2010 and rose in 2011. This shows a downward trend for BCL shareholders and an upwardtrend for ARM shareholders. The market price per share of ARM was KES 111 at end of 2009(Mystocks,st 2009) (www.mystocks.co.ke/details/20091231) KES 183 on 31 December 2010 (Mystocks,2010)(www.mystocks.co.ke/details/20101231) and KES 158 at end of year 2011(Mystocks,2011)(www.mystocks.co.ke/details/20091230). This clearly shows an increase in the wealth ofshareholders and thus the company was successful in achieving its goals. PESTEL ANALYSISPolitical FactorsEAC countries have maintained a reduced import tariff for member states, where ARM operates,according to EAC Community Gazette (2010).Due to this, cement manufacturers including ARM are nowfacing stiff competition from imported cement and thus want the levy to be raised to 35% under the EACExternal tariff (Kamndaya, 2010). ARM would have achieved better results if the duties were hiked asthere would be less competition from cheaper imported cement. Economic FactorsARM faced a number of economic challenges during the period under review. The economic growth ofKenya has slowed down in general(All Africa, 2011). The decline in the economy has led to a slowdownin the construction sector and demand for housing fell lowering the growth indemand for cement. Theslowdown can be proven by the decrease in the number of building approvals by the Nairobi City Councilin the first eight months of 2011 compared to 2010. The number of approvals in Nairobi fell by 9.7% from 2,174 to 2,407 (Otini & Ngigi, 2011). However, due to ARM’s diversification strategy, it stillmanaged a steady revenue growth.ARM was adversely affected by the fluctuations in the foreign exchange rates in the countries it operates.Kenya, Tanzania, Rwanda and South Africa have very volatile foreign exchange rates(ADB, 2011). BySeptember 2011, Kenyan currency depreciated from KES 83 to KES 107 against the US Dollar that led toan unrealised exchange loss of KES 681 million arising from the US Dollar dominated borrowings.However, some of this loss was reversed as the KES strengthened at year end. (ARM, 2011)A positive economic factor for ARM is the increased demand in real estate in Kenya especially amonghigh and middle income and middle income citizens which stimulated demand for ARM’s products(KAM, 2012). However, it should be noted that this increase in demand is slowing down as stated above.Social FactorsAccording to the KAM (2012) a rapidly growing urban population in the major Kenyan towns of Nairobi,Mombasa, Kisumu, Nakuru and Eldoret, accounting for a third of the urban population led to an increaseddemand for housing and shelter which in return led to increased demand for cement products enablingARM to achieve a growth in its revenue. This growth is expected to continue as urban population grows.A growing middle class of educated young adults with a high purchasing power has led to an increaseddemand for housing(BBC, 2010). ARM benefitted from this and thus enjoyed increasing sales of cement.Technological factorsARM installed state of the art cement processing plant in Kaloleni, Kenya (ARM, n.d.). This helped raiseits capacity and increase efficiency while saving on power costs as the plant has an in built powergeneration unit. The installed plant is ISO 9001:2000 certified for quality management purposes thatensures that cement produced is of the highest quality. Lower price and better quality led to increase inmarket share and thus revenue.ARM suffered heavy losses due to unprecedented power outages. It is therefore planning with EastAfrican Portland cement to set up a coal plant and to recycle the waste heat from the clinker furnaces. If itdoes this, it will save up to 40% of their costsCooper (2009). Environmental factorsGlobal changes in climate and calls for reduction in emissions by industries required ARM to includeenvironmental conservation in its corporate social responsibility. This influenced the ultra-modern cement3 and lime plant in Kaloleni to be built in such a way that its emissions are less than 20 mg/Nm and is ISO14001:2004 for environmental management systems (ARM, n.d.). The company has also been awardedthe highest twice in the “Total Eco Challenge” for its work in environmental and tree planting activities inthe country. (ARM, 2011)Kenya enacted an environmental protection act that requires all industries to obtain an environmentalimpact assessment before proceeding with the audit (Ministry of Environment and Mineral Resources,n.d.). This assessment is carried out over an intended project activities which interfere with the naturallyoccurring environmental features like flora and fauna (Ministry of Environment and Mineral Resources,n.d.). ARM is bound to these legislations and had to do the necessary to comply. Legal factorsThe Kenyan government environmental laws require all firms to reduce pollution. ARM responded byhaving a low emissions plant in Kaloleni. The laws are implemented through National EnvironmentalManagement Authority (NEMA) and include laws relating to waste management, air pollution, waterquality regulations among others (Yager, 2012). These laws are stringent with punitive measures thathave forced ARM to incur extra costs to ensure compliance.Kenya’s new constitution that was passed in 2010 grants workers greater rights and freedom to join tradeunions as well as better insurance. ARM therefore had to incur extra costs to comply with the new safetyand wages requirements as listed by the Kenya Labour Ministry (2011).SWOT ANALYSISStrengthsARM’s success is attributable to its ability to engineer and build world class cement plants at lower thanaverage costs in comparison to its competitorswhich enabled it to become a market leader in the miningand minerals industry in Kenya (Worldwide Company Profile, n.d.). ARM has won numerous awards dueto innovation initiatives in the company in development of cutting edge technology (ARM, n.d.).It hasintegrated cement manufacturing plants that benefit in processes like heat efficiency, suitability ofsecondary fuel and lower maintenance costs(ARM n.d.). ARM has a diversified product portfolio including cement, sodium silicate, fertilizers, quick lime,hydrated lime and other industrial minerals (ARM, n.d.). The diversity in its products that ensures thecompany’s revenue is not adversely affected when demand for one product falls, for example in 2009ARM fertilizer revenue fell due to a global fall in fertilizer prices, however its turnover still grew 11%due to strong performance in other sectors namely cement, sodium silicate and minerals (ARM, 2011).ARM does not import clinker, a key ingredient in cement manufacture (ARM, n.d.) shielding it fromvolatilities in exchange rates especially when the dollar rate goes up which causes the price of clinker toalso rise.WeaknessesARM is susceptible to the global foreign exchange market as its loans are in US Dollars so a rise in thedollar value causes its debts to increase proportionately in addition to the loan interest. The high costs oftransportation and electricity in East Africa region means its cost of production is high which fails tocompete with cheaper imported cement (ARM, 2011).ARM was involved in fertilizer scandals. As reported by Muchira (2012), ARM breached purchasedfertilizers meant for sale to farmers through a government subsidy program but attempted to repackage itfor resale. The fertilizer was impounded by the police and further investigations were carried out. Thisscandal exemplified governance problems in ARM that caused bad publicity and a fall in demand for thecompany’s products.ARM had to contend with closure of its Kaloleni factory because of non-compliance to NationalEnvironmental Management Authority (NEMA) laws. According to Kithi (2012) ARM management "